SME in Germany

SME definition:
In German-speaking countries, SME is commonly referred as “Mittelstand”. To define SME
quantitatively, no. of employees and annual turnover can be used as defining parameters. In Germany,
the enterprises with annual turnover worth up to DM 1 million and Max of 9 employees are considered
as small enterprises. The enterprises, with annual turnover worth form DM 1 to 100 million and 10-499
employees, are considered as medium enterprises.

The scheme of classification is different as per EU norms. The currency considered in turnovers to
classify the enterprises will be in ECU and the division between small and medium enterprises happens
at 50 employees. And for medium enterprises, the maximum no. of employees are 250.

Importance of SME in Germany:

Approximately 3.2 million SME, self-employed professionals in different sectors characterize the German
Economy. SME represent 99.6% of German businesses based on turnover taxes. They employ 29 million
people or 69% of working population and offer 80% of training places. 57% of total gross value addition
to the industry comes from SME.

SCALE DISTRIBUTION IN THE SME

SECTOR by turnover
The high majority of Enterprises
are small.

87 % of the enterprises have 0%

5%2%
6%
less EUR 1 million turnover

87%

Less than EUR 1 million euro EUR 1 million to EUR 2 million

EUR 2 million to EUR 10 million EUR 10 million to EUR 50 million
More than EUR 50 million
 SECTORAL DISTRIBUTION IN THE
SME SECTOR
Other Industries Manufacturing
6% 7%
Other Construction
3/4th of SME operate in service
Services 10%
sector 17%
Highest share was occupied by
business services

Manufacturing sector occupy Trade

only 7% of SME 17%

Catering and
hospitality
Business 3%
Transportation
Services Financial Services 5%
31% 4%

SME support at EU
To have a proper integration in social, economic, political terms European Union had
some initiatives. EU tries to support the backward regions, countries which suffer from
structural crisis mainly if there is traditional industries fall down(European fund for regional
development EFRE) and also supports the specific backward groups independent of their
region.
Thus support for SME comes from EU in two main ways. Firstly, regional policy
measures. This provides an indirect assistance to SME. These policies also have a direct policies
towards small and medium enterprises in regard of upgrading the technology.
EU has various structural funds, each focusing on different target groups. Like
EFRE – European Fund for REgional development. It focusses regions with social and economic
problems. It aims on creating employment, developing and restructuring of industrial areas and
other development projects.
ESF – European Social Fund. It focusses on training, education, personnel support in science and
tech. In support of SME, wide range of programs and institutions have been established
To provide support to more specific sectors, EU FTE(Framework Program for Support of
Science and Technology) in support of science and technology, EIF(European Investment Fund)
to provide capital to support innovative startups, Research and Development. It involves
cooperation between firms for loans, VC funds and credit guarantees.
SME policies in Germany:
General Assembly(GA) which was formed in 1969 is used in reduction of disparities
between different regions of Germany. Federal and Länder governments (States in German-
speaking countries are called as Länder) contribute 50% each to the funds for the regional
policies. But the implementation of the policies will be the responsibility of Länder government.
Like the EU regional policies, the German regional policies also focus mainly on economic and
social issues.
Main goal of these regional policies is to protect the competitiveness of the German
economy in the international landscape by promoting key technologies and basics research. GA
policies, funds also subsidise consultancy for training in finance, in R&D and for loan
guarantees.
In addition to the GA policies, special program run to support small and medium
enterprises. Some are joint initiatives of EU and federal government like ‘initiative for adoption
of SME in European market’ to aid the introduction of systems of quality and environment
management. A SME policy has been launched in 1970 to create a proper framework condition
for SME and to decrease market failures.
Seeing the increasing structural growth of SME, in 1970’s, SME policies are
introduced in Länder level. Today there are 100+ support programs, 1000+ economic support
systems which are both public, private.